3 digital trends to watch in 2023

Posted on 15/12/2022 by Ben Wood

As we look ahead to 2023, there are three key trends that are expected to shape the marketing and advertising industry.

These include the continued rise of artificial intelligence and automation, the increasingly difficult balance between personalisation and privacy, and the macroeconomic impact of rising inflation and interest rates on marketing budgets.

1. Balancing privacy and personalisation

One of the biggest challenges facing marketers in 2023 is how to balance the need for personalisation with the growing demand for consumer privacy.

Source: 2023 Advertising Challenges (Statista)

Personalisation is crucial for effective marketing, as it allows businesses to tailor their messages and offerings to the individual needs and preferences of their customers. This can lead to higher engagement, conversion rates, and customer loyalty. However, with the rise of data privacy laws like the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States, businesses must now be careful not to violate their customers’ privacy rights.

In addition to rising privacy demands, marketers are also being hit by major disruption to advertising, reporting and attribution, as third party cookies are deprecated in all major browsers. We have also seen how Apple’s changes to the way they handle advertising identifiers in apps (IDFA) has impacted the revenues of social media giants such as Facebook.

These technological developments have impacted the backbone of effective targeting and measurement, and are creating a much needed mindset shift in marketing and advertising. Many advertisers are already exploring using advanced attribution techniques and being more transparent about their data practices to measure the effectiveness of their marketing efforts.

There is a clear sign of this in a recent survey by the Interactive Advertising Bureau on 2023 investment trends, where the majority of the areas marketers listed as investing more in were related to measurement challenges caused by the loss of third party cookies and increased privacy constraints.

Source: IAB 2023 Outlook Survey

How should I prepare?

Get comfortable with data modelling

Developments such as Google Analytics 4, consent mode and enhanced conversions mark a clear shift from precision to prediction. Based on data modelling and machine learning, Google’s approach to measurement and attribution is already shifting towards predicting performance.

Google Analytics 4 is of course just one example of a shift towards data modelling in 2023, however many brands are moving beyond this to econometric measurement solutions such as Media Mix Modellinga statistical technique used to optimise the allocation of advertising budgets across different channels, such as television, radio, print, and online.

Media Mix Modelling involves using data on sales and other key performance indicators, along with information on the advertising that has been done, to build a model that can predict the impact of different advertising strategies on sales. This can help companies make more informed decisions about where to allocate their advertising budgets, reducing reliance on third party cookies for tracking specific campaign performance.

Invest in 1st Party Data

First-party data, the information you gather and hold on your customers, offers the perfect means to deliver relevant, measurable campaigns on a privacy-first web. This is the gold standard for marketing data in that it is collected and owned by brands.

Opted-in newsletter subscribers are an example of first-party data that can be collected by brands. This data is limited in scale vs. 2nd and 3rd party data but much richer and more valuable once collected.

What is first party data?

Businesses can use data that they already have on hand, such as purchase history or browsing behaviour, to create tailored recommendations or advertising messages to addressable audiences online.

eMarketer Podcast: What's the right approach to collecting first-party data? - Insider Intelligence Trends, Forecasts & Statistics
Source: eMarketer

In the year ahead, brands need to be more transparent about the data that is collected and how it is used. This includes providing clear explanations of data collection practices in privacy policies and giving customers the option to opt out of certain types of data collection.

The real key to building first-party data is a clear exchange of value for consumers in return for their data. This is proving a big challenge for many brands, with only 15%of consumers feeling they’re getting good value from granting access to their data.

A perfect example of a brand nailing the ‘value exchange’ that many of us can relate to is Spotify Wrapped, which offers users enough value that they seemingly don’t question the fact Spotify has been collecting massive amount of data on their listening habits!

Cut through with contextual ads

As advertisers look for ways to overcome the eventual loss of third party cookies and their precision targeting benefits, many are reverting to contextual targeting as an alternative.

This is backed by a recent survey from the IAB which shows 46% of advertisers are going to invest more in contextual advertising in the year ahead.

Source: IAB 2023 Survey

However, with more advertisers turning to contextual over the coming months, attention grabbing creative will become even more crucial for your business to cut through the noise as advertisers move from a 1:1 to a 1-to-many targeting approach.

2. Smarter AI, automation

Artificial intelligence (AI) and automation are having a profound impact on the world of marketing, eroding more of the day to day tasks many digital marketing practitioners undertake on a daily basis.

A great example of this in the world of paid media is Google Performance Max, which has fundamentally impacted the way that advertising practitioners approach their work on Google Ads, by adding the ability to advertise across multiple Google products (YouTube, search, display, maps) via a single, integrated campaign.

Performance Max campaigns launch to all advertisers

Google Performance Max is an example of how AI and automation can help advertisers to achieve better results with less effort. As these technologies become more advanced, advertising practitioners will need to adapt and embrace new ways of working in order to stay competitive.

Another AI development that marketers will continue to experiment with in 2023 is Chat GPT, which has the potential to save heaps of time on common marketing tasks such as first-draft copywriting, creating ad-copy and even code prototyping.

An example of prototype code generated using ChatGPT prompts

Of course, ChatGPT is not yet capable of replacing human effort altogether, and is at this stage more of a time saving mechanism to create initial drafts of content, code and support information retrieval.

Like many other AI developments in marketing, ChatGPT could save marketers a significant chunk of time across a variety of tasks, driving huge efficiencies and freeing up more time to focus on the bigger picture.

How should I prepare?

Get the most from Google Performance Max

To get the most out of Google Performance Max, advertisers need to provide as much data as possible to optimise the algorithm. This can include information about your target audience, such as demographics and interests, as well as data about your own business, such as product information and pricing. The more data that is available, the better the algorithm will be able to optimise the campaign.

Advertisers will also see better results by investing in high quality creative assets such as bespoke videos and images. Google can automate the generation of videos for you, but the quality is not good enough to generate attention in such a saturated advertising landscape.

One of the key benefits of AI and automation in paid media is the ability to automate time-consuming tasks, such as bid management and budget allocation. This allows advertisers to focus on strategy and creative, which is where you could see a significant edge vs. your competition.

Invest in data integration

Data integration is increasingly important in an era of automated pay-per-click (PPC) advertising. Automation relies on data to make decisions and optimise campaigns. Without access to high-quality data, automated systems will be unable to make effective decisions, and campaigns may underperform.

As an example, the illustration below shows 2 potential audience types. One group may spend on average £1,000 per year, the other spends £0. If we rely on optimising around CPA targets alone, the algorithms will treat both groups the same. The key here is to integrate conversion values (from your CRM system) to enable Google and other platforms to optimise for actual revenue, rather than CPA.

An example of why data integration is critical for Paid Media automation

By combining data from different sources, you will improve the effectiveness of PPC campaigns and gain a deeper understanding of which customers are driving the most value for your business.

3. Macroeconomic impact on budgeting

The macroeconomic environment will have a significant impact on marketing in 2023 and beyond. Economic conditions, such as levels of employment, inflation, and consumer confidence, can influence consumer behaviour and spending habits, which in turn can impact the effectiveness of marketing efforts.

UK consumer confidence is at an all time low

With consumer confidence at its lowest point since records began, and with a global recession looming, consumers will be more cautious with their spending in 2023. Additionally, rising interest rates and inflation have increased the cost of doing business, which can make it more difficult for businesses to invest in marketing and other growth initiatives.

This means that marketers will need to justify budgets more than usual in 2023, as more scrutiny will be placed on marketing spend due to the turbulent economic environment.

Marketers will be scrutinising budgets more frequently in 2023

This additional scrutiny over ROI, coupled with the reporting and attribution challenges we’re already seeing due increased privacy constraints and the death of third party cookies will no doubt provide marketers with a major headache, and it is this combination that I believe will present the biggest marketing challenge over the year ahead.

How should I prepare?

Balance Marketing Investments

We know that marketing is particularly vulnerable to budget cuts when the economy starts to contract. Marketing can feel like a luxury – a discretionary activity that isn’t contributing to the bottom line. In the short term, cutting off marketing budgets and saving those costs may improve net profit. But the long-term impact of that can be significant and damaging.

A report by the Ehrenberg-Bass Institute found that companies that paused their advertising for a year experienced a decline in sales – on average a 16% drop. The research also found that it may take longer than a year of spend to make up for that pause.

Source: Ehrenberg Bass

In addition to retaining budgets, companies must find the right balance between brand building activity and short-term sales activation. When existing demand dries up, it’s time to invest in brand building to drive mental availability – ensuring a customer is not only aware of a brand’s existence but also knows what it does and what it stands for.

Source: Les Binet & Peter Field

That doesn’t happen automatically and it can’t be achieved overnight. Building mental availability and linking your brand to buying triggers is the work of long-term brand building.

This is important because research from LinkedIn’s B2B Institute and the Ehrenberg-Bass Institute shows that up to 95% of customers are not ‘in-market’ to buy your product right now. Of course, this will flex depending on your category and purchasing cadence but the principle holds true – there will always be more people in the category who are not ready to buy than those who are ready to buy.

In times of uncertainty, consumers may be more likely to choose brands that they know and trust, rather than taking risks on unfamiliar or untested options. Investing in long-term branding is therefore critical in a recession, and will help your business to position itself for growth when the economy recovers.

In summary

Businesses will need to be agile and adaptable to technological and macroeconomic challenges in the year ahead. This requires a mindset shift in reporting and measurement, and an improvement in our ability to report on the business impact of marketing investments to justify marketing spend.

2023 will be another landmark year for privacy, as we move into an era of data modelling and filling in the gaps via machine learning. Attribution has always been imperfect, but the shift to Google Analytics 4 will open many marketers eyes to this reality.

Finally, we must embrace the many benefits of AI and automation in the year ahead, and understand that the role of marketers is shifting away from optimisation toward consultancy, from granular level controls to understanding the bigger picture. It’s time to act now to avoid being left behind — not just by competitors, but by technology itself.

If you’d like to discuss how Hallam can help you with your brand’s journey in 2023 and beyond, contact us here.

Additional reading

IAB 2023 Outlook Survey

MediaLink Revelation Report 2022

Global Ad Outlook 2023

Ebiquity Study: Flash Briefing 2023


Enjoy this article?

Subscribe for weekly insights

3 digital trends to watch in 2023

Let’s thrive together

Get in touch to take the first step.

Contact us